Middle East stock markets fall on Israel-Gaza violence

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The repercussions of the Israel-Hamas conflict rippled through stock markets in the Middle East and North Africa on Sunday.

Israel's Tel Aviv share index the TA-35 ended the session about 7 per cent lower, pulled down largely by banking shares. This was the market’s sharpest fall in more than three years.

Other stock markets beyond Israel also felt the shock waves. Saudi Arabia's Tadawul, which is among the world's top 10, fell by 1.6 per cent, while Egypt's EGX30 index fell about two per cent.

Kuwait’s main market was down by more than 1.5 per cent, Jordan’s ASE index declined 0.4 per cent, Qatar equity markets slipped 0.6 per cent, while the Bahrain All Share Index lost 0.06 per cent.

Analysts say the impact on Gulf and Middle East markets depends on whether the conflict spreads.

“This will add more uncertainty to markets, with inflation and growth taking a step back and geopolitical risk taking centre stage. We could expect a spike in volatility, with short-term fixed income becoming again a safe haven, while cyclical sectors will be in the spotlight,” Gonzalo Lardies, senior equities fund manager at Andbank, told Bloomberg.

However, Alfonso Benito, chief investment officer at Dunas Capital, said: “I don’t expect the situation to have a meaningful impact on markets. This is a long-standing terrible situation but other than some short term volatility it shouldn’t have a big impact".

As regards the impact of the conflict on the crude oil price, Bloomberg reported that as oil traders prepare for the market to open after the sudden outbreak of war in Israel, one question is central: will the conflict spread?

Oil prices closed higher on Friday but posted their biggest weekly loss since March amid demand concerns.

Brent, the benchmark for two thirds of the world’s oil, gained 0.61 per cent, or $0.51, to settle at $84.58 a barrel. West Texas Intermediate, the gauge that tracks US crude, rose 0.58 per cent, or $0.48, to close at $82.63 a barrel.

For the week, Brent dropped about 11 per cent, while WTI posted a more than 8 per cent decline, on market worries that persistently high interest rates would slow down global economic growth, which in turn would hit fuel demand.

“Brent crude has fallen over $10 since the end of last month as surging global bond yields have crippled the global growth outlook,” said Edward Moya, senior market analyst at Oanda.

“Energy stocks have gone from Wall Street's best trade to it is time to abandon ship. US gasoline demand destruction is intensifying and – given how overbought the energy market was in September – momentum oil selling has been fierce,” he said.